Electric vehicle stocks have become very popular among investors, as they seem to be the future of mobility. All major automotive manufacturers either already have EVs in their line of models or invested in new electric vehicles. The European Union has decided that as of 2035 to ban all sales of new cars with combustion engines. So why would we want to look at electric vehicle stocks to sell, when the sector is so hot?
I think EV stocks seems to be in a fragile condition now, as it’ll cost a lot to support the infrastructure needed for electric vehicles. I don’t think cars with combustion engines will disappear anytime soon. They still have a lot of benefits — a main one being you can refill them in minutes.
While some of the companies below will be long-term winners, I don’t think these seven electric vehicle stocks make sense as part of a portfolio in a bear stock market. There are too many high expectations, and their valuations are very rich.
So let’s look at the electric vehicle stocks to sell now.
Tesla (NASDAQ:TSLA) has been the pioneer in electric vehicles and has gained a lot of excitement and trust from investors. There’s been drama too, thanks to its volatile stock price. In 2022 it has losses of around 22%.
The firm has reached many milestones. Most notably, it became profitable in 2020 after several years and its sales growth continues to be strong.
The TSLA stock remains a very pricey stock, even after the decline year-to-date. The trailing price-earnings ratio of 102.93 is the first signal of a very expensive stock.
A closer look at other key metrics confirms that Tesla is a growth stock trading at a rich valuation. The forward EV/sales ratio of 9.43, and the forward price/book of 19.13 show how expensive it is now.
Also, European vehicle manufacturers have premium models that could harm Tesla’s sales.
Nio (NYSE:NIO) is one of the many Chinese electric vehicle makers on this list of electric vehicle stocks to sell. The Chinese manufacturers have flooded the market with cheap electric models and are trying to find a place among premium manufacturers.
NIO stock has fallen nearly 39% in 2022 and it has a very troubled and broken business model. Why is that? The firm has had impressive sales growth over the past three years and there is a robust demand for its vehicles. It is just that the company cannot make a profit out of them.
In 2021 the sales grew 138.39%, but Nio experienced a widening net loss of $12.74 billion versus a net loss of $6.3 billion in 2020. From 2017 to 2021 NIO has only made losses.
Why bet on this stock in this market when its financial performance is so weak? I’d have no second thoughts about selling shares of NIO.
Rivian Automotive (RIVN)
Rivian Automotive (NASDAQ:RIVN) has fallen almost 70% in 2022, and I think it was a very questionable investment for Amazon (NASDAQ:AMZN). Amazon invested heavily in Rivian and has seen its investment shrink too fast, too dangerous, and too recklessly.
Rivian has only started generating revenue in 2021, and it is too early to see its sales growth. On the other hand, the profitability is worrisome, as net losses have widened over the years and the firm has a negative operating income. The mechanics of costs are against it until it can find a way to sell its cars for profits.
There is a severe free cash flow problem now as free cash flow of -$1.76 billion in 2020 became even worse in 2021 to -$4.41 billion.
Rivian is a very risky bet now.
Canoo (NASDAQ:GOEV) has lost nearly 53% of its value year-to-date, yet it has a one-year target of $11.33 which is a potential gain of over 200% from Tuesday’s closing price of $3.50. is this target possible?
I argue that it is a classic case of wishful thinking.
GOEV stock is highly volatile and is driven by headlines and rumors. The news is that Walmart (NYSE:WMT) has “signed a definitive agreement to buy 4,500 all-electric delivery vehicles from Arkansas-based manufacturer Canoo with the option to purchase up to 10,000 units total” has caused a short-term rally to the shares of Canoo.
I believe this rally will fade away.
The firm has not yet had any meaningful revenue. Yet it has a market capitalization of nearly $1 billion. The shareholders have been diluted in the past year. Total shares outstanding grew by 13.4%, which is a significant stock dilution.
The forward price/sales ratio of 7.77 makes GOEV stock pricey.
Lucid Group (LCID)
Lucid Group (NASDAQ:LCID) is aiming for the niche of premium electric vehicles.
I am not sure whether this is a sound business decision, as the firm must not only compete with Tesla but also with premium European automotive manufacturers.
Lucid Group has a negative gross margin and net losses that it must find a way to turn into profits by selling its luxury models. Meanwhile the profitability is negative. A net margin of -140.94% as of March 2022 should make any rational investor think twice about investing in this stock.
The forward price/sales ratio of 22.11 is very high and signals another very pricey stock to sell.
Li Auto (LI)
Li Auto (NASDAQ:LI) has gains of approximately 5% in 2022, which sounds amazing. However, the financials tell another story. The Chinese firm has a robust sales growth trend that spiked 3,195.51% in 2020 and increased 206.34% in 2021, but net income remained negative.
If you are wondering why you should bet on the firm if it can’t turn huge sales growth into even a little net income, then you are on the right path to analyze stocks from a fundamental perspective.
What is also very negative for Li Auto is the fact that shareholders have been diluted in the past year, with total shares outstanding growing by 6.7%.
The forward price/sales ratio of 4.1 isn’t as wild as some, but still signals another expensive stock.
XPeng (NYSE:XPEV) is the last of the electric vehicle stocks to sell in this article. The feature it shares with other mentioned stocks is very strong sales growth, which makes analysts bullish. but I think their one-year target of $42.34 is unrealistic. Starting with its negative operating income, it is extremely difficult to be bullish on XPEV stock. The firm has operating expenses that are more than its gross income, which means the path to profitability is full of obstacles.
This Chinese firm is having a severe cash burn problem. It is also expensive. It has a forward price/book ratio of 3.95 and a forward price/sales ratio of 3.5. Not a bargain for sure and not a stock that you want to have in your portfolio for now, as it does not generate value. you can see that by its trailing return on common equity of -14.6%.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.